May 3, 2000
Federal Reserve Districts
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Growth in economic production in the District is moderately strong, with continued low rates of joblessness and steady growth in wages. The prices for consumer goods and construction materials are stable. However, the prices of steel and health care are increasing.
Strong demand for temporary workers continues unabated and contacts reported a significant increase in unfilled customer orders over the past two months. Contacts reported that while demand for temporary workers has not increased substantially, it is becoming increasingly difficult to find and retain qualified workers. Contacts noted only small increases in wages. Demand continues to be especially strong for administrative assistants, legal secretaries, and workers with technical and computer skills. Clerical, payroll, manufacturing, and production workers are also in high demand. Contacts also noted a growing trend for firms to retain qualified temporary workers on a permanent basis, with some firms increasingly using temporary employment agencies to find full-time employees. Strong demand for temporary workers is expected to continue into the near future.
Unions reported that wage growth remains fairly constant at an annual rate of about 3 percent for most industries and slightly higher in those requiring higher-than-average skill levels. Driven by surging pharmaceutical costs, health-care premiums have reportedly increased between 6-10 percent since last year.
Residential builders reported no significant changes in labor and materials costs, although drywall prices are expected to fall in the near term as two new production facilities in the District add to the supply.
Commercial building activity remains mixed across the District. Contractors involved in publicly funded construction continued to report substantial growth. Office construction continues to be at a high level, particularly in the downtown sections of the District's larger cities, but not at the brisk pace of public-sector projects. Retail space construction is at the same level as last quarter. Warehouse and industrial construction has declined, but contractors expect stronger conditions by the summer.
Purchasing managers in the District reported higher commodity prices in March, especially in primary metals, petroleum products, and paper products. Production levels increased slightly, while new orders remained at roughly the same levels as last month. High gasoline prices are expected to cause a steep decline in sales of heavy trucks, but current production and sales are still good.
After record sales in 1999, District auto dealers reported that brisk sales of new vehicles continued into the first quarter. Most dealers reported between 5 percent and 15 percent year-over-year sales growth. District dealers were optimistic that strong sales would continue over the second quarter, and they expect a very robust summer. March sales are said to be particularly strong, while April sales are mixed relative to March. The current inventory position of District dealers is ample, and no shortages were reported. Despite the continued strength of new car sales, sales of used vehicles have also surged in 2000.
Banking and Finance